Thousands of Scottish businesses could be saved from bankruptcy thanks to an extension from the Scottish Government to a scheme for individuals struggling with debt to businesses.

The Debt Arrangement Scheme (DAS) has been administered by Accountant in Bankruptcy since 2004. It allows individuals to repay debts through a managed programme and avoid court ­appearances. The Scottish Government has now launched the "Business DAS", allowing debts such as VAT and PAYE arrears to be repaid while a business maintains its ongoing credit facilities which are often essential for survival.

Under the scheme, creditors agree to freeze interest and charges, and cannot take further action to enforce payment of the debt as long as monthly payments are maintained. The scheme also protects assets, including the family home. All cases must be completed within five years; no payment breaks are allowed.

Scottish insolvency practitioners MLM Solutions, which has been adapting the consumer DAS to help small businesses for the last four years, welcomed the move. Ian Brown, senior manager at MLM Solutions, said: "Businesses, like individuals, can suffer from too much debt and this is often exacerbated by the lack of access to finance.

"Once creditors are chasing for payment, the small business owner has two options: try to save the business while attempting to settle outstanding accounts, or allow the business to fail by implementing an exit strategy that minimises the financial consequences."

Holyrood Business Minister Fergus Ewing said: "By extending this ­initiative to small and medium businesses and other eligible entities, we are ensuring the lifeblood of Scotland's economy receives the same protection and stops otherwise sound businesses collapsing."